Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $320,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $180,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $125,000 and $150,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Data Center Department cost will be allocated to the Warehouse Department if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)
A) $62,182
B) $180,000
C) $24,393
D) $0

Question

Goldfarb's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of $320,000 are allocated on the basis of budgeted warehouse-hours. Data Center Department costs of $180,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are $125,000 and $150,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Data Center Department cost will be allocated to the Warehouse Department if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)
A) $62,182 
B) $180,000 
C) $24,393 
D) $0

Quizplus · Accepted Answer

Warehouse provided to Data Center: 570 / (570 + 1080 + 1530) = 0.179
Data Center provided to Warehouse: 290 / (290 + 850 + 1000) = 0.136
Warehouse provides the greatest amount of service to support departments, so it is allocated first. Therefore, there will be no cost from the Data Center allocated to the Warehouse department.

Goldfarb's Book and Music Store Has Two Service Departments, Warehouse